When Evaluating a Make-Or-Buy Decision, Which of the Following Needs

question 15

Multiple Choice

When evaluating a make-or-buy decision, which of the following needs to be considered?

• A) alternative uses of the production capacity
• B) the original cost of the production equipment
• C) pension costs to the current employees
• D) material-handling costs that cannot be eliminated

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Definitions:

Fixed Expenses

Consistent costs that do not change in total over a short period, regardless of the level of production or sales.

Accumulated Depreciation

Accumulated depreciation represents the total amount of depreciation expense that has been recorded against a fixed asset over its useful life.

Operating Costs

Expenses associated with the day-to-day functionalities of a business, including costs for materials, labor, and overhead.

Scrap Value

The estimated residual value of an asset at the end of its useful life.